I can entirely see your concern, well at least the one given, that it seems to be a hiding to nothing. ..and actually the mean thoughts that might whorl around in your head that no one would want to admit; that it takes away from those children you both love and live with. I think many many second partners would try and smother those thoughts but they'd be there.
I do think, though, that if you've already raised the idea, or he has, that's as far as you can take it. Obviously he will feel many loaded emotions about his ex-w's behaviour, but if he decides to leave things as they are, as many of us men I know think "if in doubt do nothing", then you make your peace with it.
I only have MOE experience to go by. My childhood was somewhat impoverished by my father's incredibly gallant (you're allowed to think silly, just don't tell me) behaviour in giving everything to his first wife when they divorced, despite her similar, despicable behaviour. Fortunately, I suppose, there were no children by that marriage to complicate further, but the financial impact was the same if not greater (particular memory of no shoes for us, and then shoes but no meat for many days!). I don't care, in hindsight, my dad lived by rules of an earlier age and in so many ways we benefited from his ways. But my mum was angry and the one who had to deal with the shortfall (my dad did not have a consistent work life because of ill health).
Anyway, my point is that I understand, and all your feelings (spoken or silent) are allowed. But. The children are still "his" and washing his hands of them because of biology (or money) is not a good enough reason. Even if ex-w completely alienates them from him, one day they might be old enough to make their own decision to start a relationship with him. It is unbelievably cruel to withdraw from them because of their mother's actions.
Not sure if that helps really!